Economics of Cannabis Legalization

Abstract:

Marijuana legalization offers an important advantage over decriminalization
in that it allows for legal distribution and taxation of cannabis. In
the absence of taxation, the free market price of legal marijuana would
be extremely low, on the order of five to ten cents per joint. In terms
of intoxicating potential, a joint is equivalent to at least $1 or $2
worth of alcohol, the price at which cannabis is currently sold in the
Netherlands. The easiest way to hold the price at this level under legalization
would be by an excise tax on commercial sales. An examination of the external
costs imposed by cannabis users on the rest of society suggests that a
"harmfulness tax" of $.50 -$1 per joint is appropriate. It can be estimated
that excise taxes in this range would raise between $2.2 and $6.4 billion
per year. Altogether, legalization would save the taxpayers around $8
- $16 billion, not counting the economic benefits of hemp agriculture
and other spinoff industries.

As drug war hysteria subsides it becomes increasingly certain that
there must be a serious re-examination of the laws prohibiting marijuana.
The decriminalization of soft drugs has now emerged as an active political
issue in Germany, Italy, Switzerland, France and Australia. The policies
being considered range from "decriminalization," or repeal of criminal
penalties for private use and cultivation of cannabis, to full "legalization,"
in which cannabis is commercially sold like alcohol, tobacco and other
commodities.

Decriminalization has enjoyed impressive support from a succession
of official panels, including the Presidential Commission on Marijuana,
the California Research Advisory Panel, and the Canadian Le Dain Commission.
Decriminalization was also officially the policy of the state of Alaska
from 1976 through 1990, when it was narrowly overturned in a referendum.
The basic appeal of decriminalization is to reduce the harm of criminal
punishment and respect personal freedom and privacy, while avoiding offensive
commercialization. The basic flaw in decriminalization is that it does
not make allowance for pot users who cannot or will not grow their own.
The result is to create an illicit black market for cannabis that is neither
regulated nor taxed, leaving many of the same basic enforcement problems
as prohibition.

These problems can be avoided by legalization, under which cannabis
could be legally sold, taxed and regulated like alcohol or tobacco. (It
should be noted that legalization need not involve the evils of commercialization,
given suitable restrictions on advertising). The world presently has no
example of a completely legalized cannabis market, since this is forbidden
by the Single Convention Treaty on Narcotics. The nearest approximation
may be seen in the Netherlands, which officially tolerates the possession
and sale of up to 30 grams of hashish or marijuana in coffeehouses, although
distribution and manufacture are technically illegal and large-scale traffickers
are punished. The apparent success of the Dutch in controlling hard drug
abuse without a major hashish abuse epidemic has led a league of 15 European
cities to endorse the principle of legalized cannabis in the so-called
Frankfurt Resolution. An important advantage of legalization is to open
the door to taxation of marijuana - a potentially valuable source of public
revenue - while eliminating the need for an illegal market.

In the following, we will examine more closely the economics of a
legalized cannabis market.

In an untaxed free market, cannabis ought to be as cheap as other
leaf crops. Bulk marijuana might reasonably retail at the price of other
medicinal leaf herbs, around $.75 -$1.50 an ounce. Premium grades might
be compared to fine teas, which range up to $2 per ounce, or to pipe tobacco,
which retails for $1.25-$2.00. High grade domestic sinsemilla might however
cost somewhat more, due to the relatively lower yield of cannabis compared
to tea and tobacco, and the high level of U.S. labor costs. Cultivation
expert Ed Rosenthal estimates that domestic labor costs could be as high
as $5 per ounce. Advertisements from medical catalogs indicate that cannabis
cost about $2.50-$5 per pound in 1929-30. [01] Adjusting
for inflation, this works out to $1.20-$2.40 per ounce, a breathtaking
100- to 300-fold reduction from today's illicit prices, which range from
$100- $200 per ounce for low-grade Mexican to $400- $600 per ounce for
high-grade sinsemilla.

It is useful to translate these prices to a per-joint basis, where
one joint is defined to represent the standard dosage of marijuana. The
number of joints in an ounce depends on the potency of the product involved,
where potency is measured in terms of the concentration of tetrahydrocannabinol
(THC), the chief psychoactive ingredient in marijuana. THC potencies typically
range from 2-3% for low-grade leaf to 10% or more for premium sinsemilla
buds. We will define a standard dose of THC to be that contained in the
government's own marijuana joints, which NIDA supplies to researchers
and selected human subjects. These consist of low-quality 2.5%-3% potency
leaf rolled into cigarette-sized joints of 0.9 grams, yielding a 25 milligram
dose of THC. The same dose can be had in a slender one-third or one-quarter
gram joint of 10-12% sinsemilla. A typical joint has been estimated to
weigh about 0.4 grams[02] Taking this as a standard,
we will define a "standard joint" to be 0.4 grams of average-quality 6%
buds. Thus an ounce of "standard pot" equals 60 joints, an ounce of 12%
sinsemilla 120, and an ounce of government pot only 30 joints. Due to
the fact that the price of marijuana tends to be proportional to potency,
the price of a one-quarter gram joint of $600-per-ounce sinsemilla is
about the same as a one-gram joint of $150-per-ounce ditchweed, that is
around $6.

We have seen that in the absence of taxation, the price of legal
marijuana would be cut by a factor of 100 or more. At this rate, a joint
costing $6 today would cost about $.06 in a free legal market. It therefore
appears that marijuana would be a very cheap bargain compared to other
intoxicants, including alcohol.

The free-market price of joints can also be calculated by comparison
to tobacco cigarettes, which would probably cost about the same to manufacture.
Cigarettes now sell at an average of $1.83 per pack, or $.09 per cigarette,
one-quarter of which represents federal and state taxes[03]
There is no reason to think that joints could not be sold for the same
price under legalization.

At a nickel per joint, marijuana would be a uniquely economical intoxicant.
For only one-half dollar per day, a pothead could nurse a whopping ten-joint
per day habit. It may be doubted whether public opinion would tolerate
so low a price for marijuana. On one hand, it would invite extensive abuse.
Parents would no doubt object against making a serious marijuana habit
so affordable for their young. Moreover, cheap pot would also pose a serious
challenge to the alcohol industry, a powerful political interest, whose
products are over ten times as expensive. In order to make legalization
politically palatable, it would almost certainly be necessary to raise
the price through taxation or regulation.

One way to estimate a reasonable price for marijuana is to evaluate
it in comparison to the major competing intoxicant, alcohol. While it
is impossible to make an exact comparison between pot and booze, since
their duration and effects are different and dosages vary from person
to person, a joint might be roughly equated to an intoxicating dose of
alcohol - between one and two ounces, or two to four drinks. Thus one
joint might be worth two to four 12-oz. beers or 1/3 - 2/3 bottle of wine.
These are currently sold on grocery shelves at a minimum price of around
$1.50 - $2.50. It may therefore be concluded that a reasonable minimum
price for marijuana should be around $1.50 - $2.50 a joint, with higher
prices for premium grades. This works out to $90 - $150 per ounce for
standard 6%-potency marijuana.

Coincidentally, this price range is in line with that presently seen
in the Netherlands, where coffeehouses sell hashish and sinsemilla by
the gram for 4 to 15 guilders, or $2.15- $8.10[04] Taking
the cheaper grade to yield two joints per gram and the premium grade four,
this works out to $1 to $2 per joint. The fact that the Dutch have not
been plagued by widespread cannabis abuse and indeed believe they have
obtained public health benefits from their system provides reassurance
that this price level is realistic[05]

It should be noted that Dutch prices are inflated by the fact that
cannabis remains illegal, not by any form of legal taxation (though the
state does tax cannabis indirectly through the sales tax on cafes). Although
Dutch authorities tolerate a number of small-scale domestic producers,
international traffickers and domestic distributors are both subject to
busts at the whim of the police. As a result, Dutch consumers pay inflated
black market prices. This is not necessarily the optimal model for marijuana
price control, since the lion's share of the profits go to illicit traffickers.

In a legalized market, the easiest way to maintain marijuana prices
would appear to be through some form of excise tax, as presently imposed
on alcohol and tobacco. This could conveniently be assessed on licensed
manufacturers or wholesalers, like the federal tax on cigarettes. Aside
from a strict prohibition against sales to unlicensed distributors, cultivators
need not be directly regulated. Excise taxes have the advantage of being
easy to enforce, since they involve a relatively small number of distributors.
The latter in turn pass the tax along with a markup, magnifying the price
increase throughout the distribution chain.

Another way to control the market would be to tax or regulate cultivation.
However, experience shows that it is no easy task to track down and regulate
marijuana growers. More so than alcohol or tobacco, marijuana lends itself
easily to small-scale home cultivation and production. The problem therefore
arises as to how to treat home cultivation in the legal market. Clearly,
the sale of untaxed home marijuana must be banned. In theory, home cultivation
could also be taxed and licensed in order to maintain high prices. However,
it seems unlikely that such requirements could be enforced in a world
of legalized marijuana. The policing of home growers would appear to require
many of the most odious and objectionable techniques of current marijuana
enforcement, such as helicopter surveillance, snooping on homes and spying
on garden stores.

The most practical policy is thus likely to be the one most consistent
with principles of personal freedom and civil liberties, namely to let
Americans grow their own cannabis at home, just as they might grow tomatoes,
apples or grapes. The inducements to home cultivation should not be exaggerated:
in Alaska, where it was the one legal way to get marijuana before 1991,
pot continued to be sold illicitly at prices around $250 an ounce, proof
that many pot smokers are quite disinclined to grow on their own. Nonetheless,
home cultivation would effectively put a lid on the amount marijuana could
be taxed, since consumers would be induced to grow their own if prices
rose too high.

Another possible way to limit marijuana abuse would be to regulate
consumers directly, for instance, by requiring "user's licenses" for the
right to buy or use marijuana, as proposed by Kleiman[06]
By charging fees for these licenses, the state could raise tax revenues.
User fees are apt to be more costly to administer than excise taxes, since
they must be collected from a much wider population. More importantly,
they are also apt to be unenforceable, given the ease with which unlicensed
users can grow their own at home. One situation in which user fees might
be attractive would be under a regime of decriminalization, where commercial
sales were illegal. Consumers might then be allowed to purchase a license
to consume and grow marijuana for personal use. In this system, licenses
would afford the one opportunity for the government to derive tax revenues
from marijuana, while an active marijuana surveillance program would still
be needed to prevent commercial sales and unlicensed use.

The problem of cannabis enforcement was first rigorously addressed
one hundred years ago by the British Indian Hemp Drugs Commission[07]
The commission concluded that cannabis prohibition was not practicable,
and that the best solution was to tax it to the extent possible. After
examining the different regulatory systems in various provinces of India,
the Commission especially recommended the system in Bengal, where cannabis
was taxed more rigorously than in other provinces by means of a system
of excise fees and vendors' licenses. Noting that hemp drugs tended to
be much cheaper than liquor, the Commission argued that cannabis was undertaxed[08]
It also noted that there were regions where cannabis grew wild, in which
it was virtually impossible to control traffic in bhang, a low-potency
beverage made from leaves. Cannabis remained legal in India until 1989
under provisions of the Single Convention Treaty on Narcotics.

The question might well be asked from a libertarian free-market perspective
why cannabis (or other drugs) should be taxed in the first place. Why
should government concern itself with regulating what is in essence a
private decision, that is, what kind of drugs to ingest? Why shouldn't
prices simply be settled by supply and demand?

The best answer is that marijuana consumption may impose costs on
innocent third parties who do not consume it. According to standard economic
theory, such "external costs" may be compensated by means of a harmfulness
tax.[09] Examples of external costs of drug abuse include
increased insurance costs, accidents affecting third parties, and drug-induced
violence and criminality. In principle these costs must be distinguished
from "internal costs" that fall on the user, such as ill-health, reduced
personal income, poor achievement, etc. Because users already pay for
the latter, there is no sense in making them pay again through a tax.

From a non-libertarian, public health perspective, higher taxes are
often justified simply as a disincentive to prevent people from overindulging
in what is presumably an unhealthy habit. This argument is most persuasive
in the case of highly addictive drugs such as nicotine, where naive users
run a high risk of getting themselves trapped in an unhealthy habit due
to initial misjudgment. Punitive taxation appears less justifiable in
the case of cannabis, not only because it has low addictivity, but also
because of the ease with which home growers can evade excessive taxes.

In the following discussion, we will examine the external costs
of marijuana abuse as the basis for a prospective harmfulness tax. At
the outset, it should be noted that much further epidemiological research
is needed to accurately assess the costs of marijuana; nonetheless, it
is possible to hazard a guess at their magnitude. Overall, the general
scientific consensus is that marijuana has definite deleterious effects,
though less so than alcohol or tobacco. In the words of the California
Research Advisory Panel: "An objective consideration of marijuana shows
that it is responsible for less damage to society and the individual than
are alcohol and cigarettes.[10]

From a physiological standpoint, the major health risk of heavy
marijuana use appears to be respiratory harm due to smoking[11]
A recent epidemiological study by the Kaiser Permanente Center for Health
Research found that daily cannabis smokers had a 19% higher rate of respiratory
complaints[12] Aside from cases of passive smoking,
these must be counted as internal costs, except to the extent that they
may raise group health insurance costs for others. (There are actually
good grounds to believe that legalization would reduce the costs of respiratory
damage from marijuana smoking by encouraging the development of better
smoke filtration technology, the substitution of more potent, less smoke-producing
varieties of marijuana, and the substitution of oral preparations for
smoked marijuana.)

More important than the respiratory harm of marijuana is the increased
risk of accidents due to mental impairment. In the Kaiser study, this
emerged as the number one hazard of marijuana use, with daily users reporting
a 30% higher rate of injuries than non-users. Presumably, these injuries
reflected an increased risk of accidents that might also involve third
parties. Hence, accidents should probably be counted as the major external
cost of marijuana use. Other concerns, such as amotivation, poor school
performance and the controversial "gateway drug" syndrome are more properly
classified as internal costs.

In order to quantify the external costs of marijuana, it is useful
to consider those of alcohol and tobacco. These are shown in Table 1,
based on an analysis by W. Manning et al[13] aimed at
estimating the appropriate level of taxation for alcohol and cigarettes.
Manning's analysis shows how the health costs imposed on the insurance
system by tobacco- and alcohol-related illness tend to be counterbalanced
by the fact that smokers and drinkers die younger, and therefore collect
fewer pension and retirement benefits.

In the case of tobacco, Manning estimates the gross cost of medical
care for smoking-related diseases at $.26 a pack, or just over one penny
per cigarette. This turns out to be largely compensated by savings in
retirement pensions and nursing home care for smokers. The final balance
is highly sensitive to technical assumptions about the economic discount
rate, and can even be made to show net external benefits at interest rates
under 3%. Manning's final net estimate of $.15 per pack assumes a 5% interest
rate.

By estimating the equivalency between joints and cigarettes, one
can translate these costs to marijuana. On a weight-for-weight basis,
pot smokers inhale about four times as much noxious tars as cigarette
smokers[14] as we have seen, however, the average joint
weighs about half as much as a cigarette. Also, cannabis lacks nicotine,
a leading factor in tobacco-related heart disease. It seems reasonable
on this basis to suppose that a joint is equal to less than two cigarettes,
putting the net external cost of marijuana smoking at under 1.5 cents
per joint.

One fault in Manning's accounting of external costs is that it excludes
the costs of second-hand smoking, which he estimates at $.23 per pack,
on the questionable grounds that these costs are mainly internal to the
users' families. We treat them here as external costs instead. There are
grounds to think that passive smoking is of much less concern with cannabis
since pot smokers emit less smoke than cigarette smokers. It therefore
seems reasonable to conclude that the total smoking-related costs of active
and passive pot smoking are unlikely to exceed two cents per joint.

Turning to alcohol, Manning concludes that the net medical-less-pension
costs of alcoholism-related disease are $.26 for every "excess ounce"
of alcohol, which is defined to mean an ounce in excess of one per day
(Manning does not try to account for the possibility that moderate consumption
may actually extend life). These costs turn out to be greatly outweighed
by the cost of alcohol-related accidents, which he estimates at $.93 per
excess ounce. This figure includes traffic accidents to third parties
caused by drunken drivers, but does not appear to include other alcohol-related
accidents. Also missing from Manning's account are the external costs
of alcohol-related violence. Altogether, Manning concludes that the total
cost of alcohol is $1.19 per excess ounce, or $.48 per ounce when averaged
over all alcohol drunk.

While the cost of alcohol seems clearly dominated by accidents,
it is unclear how to relate these to marijuana. The burden of expert opinion
appears to be that marijuana is less of an accident risk than alcohol,
though this is disputed[15] Studies of fatal car accidents
indicate that, at least on the road, marijuana tends to be a secondary
risk factor compared to alcohol[16] On the other hand,
one survey of trauma patients found that with respect to all accidental
injuries, cannabis may be every bit as much a risk factor as alcohol[17]
In terms of intoxicating potential, one joint probably lies between one
ounce and one excess ounce of alcohol. At the high end, if one equates
a joint with one excess ounce, the accident costs of pot would be $.93
per joint. More reasonably, one could equate a joint with an "average"
ounce of alcohol, the accident costs of which work out to $.38. There
are reasons to favor a lower external cost on marijuana relative to alcohol,
notably the fact that marijuana tends to suppress violence, whereas alcohol
tends to aggravate it. From this perspective alone, an overall shift from
alcohol to marijuana may be desirable.

In conclusion, one can reasonably argue that marijuana should be
assessed a harmfulness tax of $.40 to $.95 per joint - or, say, $.50 -
$1 in round figures. Experience indicates these taxes would probably be
magnified at least twofold in the market, resulting in a minimum retail
price of $1 - $2 per joint[18] Happily, this is consistent
with the target price range we derived previously.

Different lines of reasoning thus converge to argue that cannabis
should be taxed at $.50 to $1 per joint. That is $15-$30 per ounce for
low-grade 3% leaf or $30 - $60 per ounce for 6% standard cannabis. Ideally,
the tax rate per ounce should be proportional to THC potency. In practice,
this could be implemented through a schedule of fixed product categories
similar to those used for alcohol (beer, wine and hard liquor). These
categories might include: (1) leaf (potency <3%), (2) standard blend
cannabis (4 - 10% potency), and (3) high-grade sinsemilla or hashish (potency>10%).
Other cannabis-based products, such as hashish, hash oil, tonics and foodstuffs,
could be taxed according to their leaf or bud content. It should be noted
that low-grade leaf, though harsh for smoking, could play a valuable role
in the market as a source for cooked preparations and extracts, which
are likely to play an increasing role in the market as health-conscious
consumers seek to avoid smoking.

Assuming a tax of $.50 or $1 per joint, we can venture a rough estimate
of the revenues that could be raised from legalized cannabis. According
to the 1991 National Household Survey on Drug Abuse, some 19.5 million
Americans used marijuana at least once in the year, of whom 5.3 million
used at least once a week and 3.1 million daily. About one-half of the
latter are thought to be multiple daily users, who can be expected to
make up the bulk of total consumption[19] Assuming the
mean consumption of all daily users is two or three joints per day, current
national consumption can be figured to exceed 7 to 10 million joints per
day, or 1200 to 1800 metric tons of 6% THC cannabis per year. These figures
may well be low, since the Household Survey underestimates actual use.
A considerably higher estimate is given by Kleiman, who puts 1986 consumption
at the equivalent of 2700 metric tons of 6% THC cannabis; other trafficking-based
estimates range as high as 4700 tons[20]

Consumption would surely expand further in a legal market where joints
were freely and cheaply available. At the height of marijuana's popularity
around 1979, consumption was over twice that of today. One factor that
could significantly expand the demand for legal cannabis in the future
would be the development of mild cannabis beverages like bhang, which
traditionally constituted the bulk of demand in India. It is therefore
not unreasonable to forecast ultimate consumption at 15 - 30 million joints
per day, or 2750 - 5500 metric tons of 6% THC cannabis per year.

The obvious question remains what portion of consumption would be
absorbed by home growers. As we have seen, it is probably hopeless to
limit personal use cultivation. Home growing would naturally be most attractive
to heavy users with little money, who probably account for a major share
of consumption. At $2 per joint, a three-joint per day habit would cost
over $2000 a year, a hefty incentive for any home gardener. It therefore
seems likely that home cultivation would absorb a substantial portion
of the consumption of multiple daily users, who are estimated to account
for 60% of the total market[21]

We shall estimate the size of the commercial cannabis market by posing
two price scenarios. (1) Given a $.50 excise tax and a minimum price of
$1 per joint, we will assume that home growing absorbs 20% of consumption
(that is, one-third of the consumption of multiple daily smokers), leaving
a commercial demand of 12-24 million joints per day. This works out to
about $2.2 to $4.4 billion per year in tax revenues. (2) Given a $1 excise
tax and a price over $2 per joint, we assume commercial consumption would
be cut by 40% to 9 - 18 million joints, yielding $3.2 to $6.4 billion
per year. We conclude that revenues from cannabis excise taxes might range
from $2.2 to $6.4 billion per year. This is comparable to the revenues
currently raised through the federal tax on alcohol ($8 billion) and cigarettes
($5 billion).

By comparison, in the Netherlands, a nation of 15 million people,
total domestic sales of soft drugs have been estimated at under 1 billion
guilder, or $500 million.[22] Extrapolating this to
the U.S. population, one arrives at total retail sales of about $8 billion.
If one-half of this went to taxes, one would get $4 billion per year.

Similarly, in Bengal, with a population of 50 million, the Indian
Hemp Drugs Commission reported total tax revenues from ganja of 24 million
rupees in the year 1892-3, or about $10 million (1892 dollars)[23]
Extrapolated fivefold to the current U.S. population, this would work
out to $700 million in 1992 currency. The tax on ganja was about 8 rupees
per kilo in Bengal, or just $.04 per joint in current dollars.[24]
Were the tax increased tenfold to the level we have proposed, revenues
would presumably increase to $7 billion, minus a substantial amount due
to decreased demand from higher prices.

In addition to excise taxes, states could impose sales taxes on cannabis.
Unlike excise taxes, sales taxes would be proportional to final retail
price, including the added markup for premium brands. Just like alcohol,
it can be expected that marijuana would often be sold for substantially
more than its minimum price: in a hotel bar, a good sinsemilla joint might
well go for $5. Assuming average retail prices of $ 1.50 - $2.50 per joint,
and sales taxes between 4% and 6%, the total revenues raised might range
from $200 million to $1.3 billion.

In addition, legalization would create numerous revenue-generating
spinoff industries, such as coffee houses, gardening equipment and paraphernalia.
The city of Amsterdam, with a million people, boasts 300 coffee houses
retailing cannabis[25]. Scaled to the U.S population,
this would amount to over 60,000 retailers and 100,000 jobs.

Finally, the legalization of cannabis would also permit the agriculture
of hemp, a versatile source of fiber, protein, biomass and oil, which
was once one of America's top crops. Hemp production might well rival
that of other leading crops such as cotton or soy beans, which are currently
on the order of $ 6 - 10 billion per year.

On the other side of the ledger, legalization would save the considerable
economic and social costs of the current criminal prohibition system.
Current federal drug enforcement programs run at $13 billion per year.
State and local programs are probably of similar or greater magnitude:
in California, the Legislative Analyst's Office estimated the cost of
state drug enforcement programs at around $640 million per year in 1989-90,
plus perhaps twice as much more in local expenditures[26]
A sizable chunk of these costs involve cannabis, which accounts for 30%
of drug arrests nationwide. Legalization of cannabis would also divert
demand from other drugs, resulting in further savings. If legalization
reduced current narcotics enforcement costs by one-third to one-fourth,
it might save $6 - $9 billion per year.

The economic benefits of marijuana legalization are summarized in
Table 2. The total direct savings to government in taxes and enforcement
come to some $8 - $16 billion per year. These figures are somewhat lower
than those sometimes bandied about in public discourse, as both legalizers
and prohibitionists have a tendency to make consumption estimates that
are in our opinion inflated. Nonetheless, the benefits of legalization
seem both substantial and undeniable, and deserve to be taken seriously.

Footnotes

[01] A 1929-30 Parke-Davis catalog advertised a 4
oz. bottle of tincture of cannabis of 20% potency for $5, which works
out to the equivalent of $5 per pound at 5% potency. Another Squibb catalog
of uncertain date lists powdered cannabis at $2.50/lb: from the collection
of Dr. Tod Mikuriya.

[05] A similar price range may be found in the state
of South Australia, where the cultivation of fewer than 10 plants has
been decriminalized to a minor misdemeanor punishable by a fine. There
cannabis is sold on the black market for about $100-$150 per ounce, about
one-half to one-third the price elsewhere in Australia.

[08] In Bombay, the Commission heard testimony that
"the ordinary liquor consumer pays twice as much for what he wants as
the ordinary ganja consumer would, or three times as much as the ordinary
bhang drinker. I think the rates should be equalized." (Report of the
British Indian Hemp Drugs Commission, 1893-4,, Vol. 1, Chap. XVI, p. 327).
Even in Bengal, where taxes were higher, the Commission found that "the
average allowance of liquor to the habitual consumer was "much higher
than in the case of ganja." It concluded, "Judged by this test, there
is room even in Bengal for increased taxation" (ibid., p. 311).

[09] Lester Grinspoon, "The Harmfulness Tax: A Proposal
for Regulation and Taxation of Drugs<" North Carolina Journal of International
Law & Commercial Regulation 15#3: 505-10 (Fall 1990)

[10] 20th Annual Report of the Research Advisory Panel
Report, 1989 Commentary Section: available from Dr. Frederick Meyers,
Univ. of California, San Francisco.

[17] Dr. Carl Soderstrom et al., "Marijuana and Accidents:
Use Among 1023 Trauma Patients," Archives of Surgery , 123: 733-37 (June
1988). Conceivably, alcohol may be a greater risk factor in traffic accidents
because it promotes speeding, whereas pot smoking-drivers tend to slow
down. On the other hand, marijuana may be more involved in other kinds
of accidents where forgetfulness or loss of concentration are a risk factor.

[18] In Bengal in 1892-3, excise taxes and licensing
fees on ganja totaled more than 10 rupees per ser (i.e., kilo), over one-half
the average retail price of 20 rupees. This appears to have represented
a 10-fold increase over the free-market price of cannabis, which sold
for as little as 2 rupees in other provinces where it was lightly taxed.
Report of the British Indian Hemp Drugs Commission, Vol. 1, Ch. XV p.295
and Ch. XVI pp. 311-2, p.321. The U.S. cigarette tax has historically
accounted for about 25%-50% of retail prices, according to the Tobacco
Institute (op. cit.).

[19] Among 18-25 year-olds, four-sevenths of daily
users reported being multiple daily users, according to NIDA in its National
Survey of Drug Abuse: Main Findings 1982.

Dale Gieringer is coordinator of California NORML (National Organization
for the Reform of Marijuana Laws) and co-founder of the California Drug
Policy Reform Coalition. He received his doctorate in Engineering-Economic
Systems at Stanford.